[Car Talk Forest] Semiconductor Followed by Urea Solution and Magnesium... Persistent Shortages Becoming Routine in the Car Industry

Will Shipping Delays Become Routine... Increasing Shortages of Materials and Components

[Asia Economy Reporter Yu Je-hoon] This year, global automakers have come to realize more than ever the importance of the ‘supply chain.’ Starting with vehicle semiconductors at the beginning of the year and ending with shortages of urea solution and magnesium at the end of the year, these scarcities have been tightening the production and sales of each automaker.

A hot topic recently heating up the domestic industry is ‘urea solution.’ Urea solution is a substance used to reduce nitrogen oxides (NOx) in exhaust gases emitted from diesel vehicle internal combustion engines. Diesel vehicles sold domestically are required to be equipped with NOx reduction devices (SCR), making it an indispensable material in the industry. The problem began when China controlled the export and import of urea, citing domestic shortages. This has led to a situation where not only large commercial vehicles such as major trailers that maintain the domestic logistics arteries but also ambulances and fire trucks could come to a halt.

Automakers cannot simply smile at this situation. As supply issues have surfaced, the price of urea solution has risen sharply from the previous 8,000 KRW per 10 liters to 50,000?70,000 KRW, and recently even 100,000?150,000 KRW. Diesel new cars must be filled with urea solution before delivery, and continuous supply is necessary for operation after sales.

Especially hard hit are the imported car industry and commercial vehicle industry, which have a high proportion of diesel vehicles. In the case of the imported car industry, there is no immediate problem with delivery due to urea solution shortages, but the situation has raised attention to eco-friendly vehicles, creating a tense atmosphere. The commercial vehicle industry, mostly diesel, is also deeply concerned as it may become difficult for vehicle owners to secure urea solution after delivery.

The shortage is not limited to urea solution. Magnesium shortages have also been consistently mentioned due to production slowdowns in China. Magnesium is a material commonly used to reduce the weight of finished vehicles, applied not only to the body but also to various parts. Therefore, a shortage of magnesium is highly likely to lead to production disruptions.

The magnesium issue also arose due to production setbacks in China. It is an ironic situation caused by China’s efforts to address climate change. A major foreign media outlet quoted Volkswagen’s purchasing officer as saying, "If current plans continue, a magnesium shortage will definitely occur."

However, what fundamentally troubles automakers the most is the shortage of vehicle semiconductors. Due to the ongoing supply difficulties since early this year, delivery delays have become the ‘New Normal’ domestically. For example, the Kia Sorento hybrid model, a popular mid-size SUV in Korea, currently takes 11 months from order to delivery even if ordered earlier this month.

It is even more problematic that this issue is harder to resolve than the immediate urea solution shortage. A representative of a parts supplier for an automaker recently said, "In the worst case, urea solution issues can be resolved by removing the SCR or repurposing industrial urea for vehicle use, but there is no such trick for semiconductors."

This content was produced with the assistance of AI translation services.